Clearing the Air: The Clean Air Act, GATT and the WTO's Reformulated Gasoline Decision

Article excerpt

I

INTRODUCTION

Over the last four decades, the growth in the amount and complexity of air pollution in the United States resulting from the increasing use of automobiles(1) (along with other sources) has resulted in mounting dangers to the public health.(2) The American Lung Association has estimated that people in the United States spend $40 billion per year in additional health care cost associated with air pollution.(3) The Clean Air Act was created to combat this; its goal has been to protect and enhance the United States' air resources.(4) In furtherance of this goal, the United States Environmental Protection Agency ("EPA") promulgated regulations governing gasoline formulation to ensure that polluting compounds in gasoline do not exceed 1990 levels.(5) However, Venezuela complained that the EPA regulations discriminated against foreign gasoline refiners who wished to sell their products in the United States. Accordingly, it filed a complaint with the World Trade Organization ("WTO"), claiming that the U.S. regulations subjected foreign gasoline to stricter standards than were imposed on domestic gasoline.(6)

The Venezuelan complaint suggested the possibility of a fundamental conflict between domestic environmental policy and U.S. obligations under international trade rules. Most importantly, it provided a stern first test for the World Trade Organization, the infant organization heralded as the world's most important economic body.(7) Created in 1995, after four years of preparations and seven more years of negotiations, the WTO has been described as the "most ambitious, comprehensive and geographically wide trade agreement ever attempted or reached."(8) It was the culmination of a series of multilateral trade negotiations, known as the Uruguay Round, that were part of the General Agreement on Tariffs and Trade ("GATT""(.9) GATT itself was viewed as a rather unwieldy process for reducing tariffs and resolving trade conflicts among its member nations."(10) "The Uruguay Round ... transform[ed] the GATT into a permanent international institution, the World Trade Organization, responsible for governing the conduct of trade relations among its members."(11) The Uruguay Round, through its creation of the WTO, produced one other notable institutional reform: "it strengthened the multilateral dispute settlement mechanism so that countries [would] be more likely to comply with [international trade] rulings .... "(12)

Without a doubt, an open global market is as much to be desired as a clean global environment. Yet, as environmental regulations increasingly impact products with greater trade flows (and vice versa), the conflict between environmental protection and trade liberalization is destined to grow in intensity.(13) The Venezuelan challenge highlights the effect of the WTO's liberal trade rules on domestic environmental policy, while simultaneously providing an opportunity to scrutinize the WTO's new dispute settlement mechanism in action. Specifically, this article uses the reformulated gasoline dispute as the centerpiece for an examination of the conflict between a strict, domestic environmental law, the Clean Air Act, and the liberal trade rules embodied in the WTO agreement.

Section I of this article provides a brief history of the Clean Air Act. Section II describes the 1990 Clean Air Act Amendments and the reformulated Gasoline Rules, including a discussion of the standards and baseline limitations which were at the center of the controversy in Venezuela's complaint to the WTO. Section III offers a brief history of the GATT, the WTO, and the new dispute settlement mechanism. Section IV describes the compromise regulations the EPA devised to bring the U.S. environmental rules into compliance with this country's obligations under international trade law. Finally, Section V provides an analysis of the rulings of the WTO dispute settlement panel. The article concludes that in the wake of the panel rulings, the international trade framework must be modified to better recognize the importance of environmental issues. …